Alert February 26, 2013

FRB Extends Comment Period to April 30, 2013 on its Proposed Rule to Enhance Prudential Standards for Foreign Banking Organizations and Certain Foreign Nonbank Financial Companies

The FRB extended from March 31, 2013 to April 30, 2013 the comment period on the FRB’s proposed rule (the “Proposed Rule”) that would enhance prudential standards for large foreign banking organizations and certain large foreign nonbank financial companies supervised by the FRB.  The Proposed Rule was discussed in the December 26, 2012 Financial Services Alert and in the summary of the FRB’s potential revisions to U.S regulation of foreign banking supervision provided in a speech by FRB Governor Daniel K. Tarullo and discussed in the December 4, 2012 Financial Services Alert. 

The FRB noted that the enhanced prudential standards include risk-based capital and leverage requirements, liquidity standards, risk management and risk committee requirements, single-counterparty credit limits, and stress test requirements. The Proposed Rule is intended to implement the enhanced prudential standards and early remediation requirements under Section 165 and 166 of the Dodd-Frank Act.  Two key changes for foreign banking reorganizations covered under the Proposed Rule would be that they would have to (a) allocate capital specifically to their non-branch activities in the U.S. and maintain their capital in a U.S. intermediate holding company, and (b) maintain a significant liquidity buffer in the U.S. The FRB said that it extended the comment period because “of the complexities of the issues addressed and the variety of considerations involved” with implementation of the Proposed Rule.